Educational services company WordSmart Corporation and its president have agreed to settle Federal Trade Commission charges that they deceptively marketed the company’s programs to the parents of school-age children in advertising that included a television infomercial featuring quiz show host Alex Trebek.
The settlement order prohibits WordSmart and David A. Kay from misrepresenting the benefits of educational goods or services, and from violating the agency’s Telemarketing Sales Rule (TSR).
The FTC’s complaint alleges that the defendants targeted parents who wanted to improve their children’s performance in school or help them prepare for standardized tests, such as the SAT or ACT. They sold the programs via telemarketing and their website, charging between $15 and $300 for each program.
The defendants’ allegedly false and unsubstantiated claims included that, by using WordSmart for a total of 20 hours, students were guaranteed to improve letter grades by at least one GPA point, SAT scores by at least 200 points, ACT scores by at least four points, GRE and GMAT scores by at least 100 points, and IQ scores. They also falsely claimed they would provide a full refund within 30 days if the buyer was not satisfied.
In addition, the defendants allegedly repeatedly called consumers whose phone numbers are listed on the National Do Not Call Registry, refused to honor requests to stop calling, and failed to connect a consumer to a sales representative within two seconds after a consumer answered the phone, as required by the TSR.
The stipulated final order prohibits the defendants from misrepresenting the benefits, performance, or efficacy of their educational goods or services, including claims that the products will help students learn faster, improve reading speed, or increase grades, IQ scores, or test scores. It also bars them from misrepresenting the terms of their refund policy and violating the TSR’s Do Not Call rules.
The order imposes a $18.7 million judgment that will be suspended when the defendants have paid $147,400. The full judgment will become due immediately if they are found to have misrepresented their financial condition.
The Commission vote authorizing the staff to file the complaint and proposed stipulated final order was 5-0. The order was entered by the U.S. District Court for the Southern District of California on October 7, 2014.
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